Hotels asked to pay $30m a year for convention center expansion

Stephen Cushman, a member of the convention center board and an unpaid volunteer charged with helping the mayor’s office craft a financing plan, has said other potential sources of revenue include a levy on taxicabs and Gaslamp Quarter restaurants. He also says redevelopment funds are a possibility, and he will seek a contribution from the San Diego Unified Port District and a share of the room tax revenue from a proposed addition to the Hilton San Diego Bayfront.

In 2009 the mayor’s convention center expansion task force estimated the cost of the convention center expansion at $711 million plus a $40 million pedestrian bridge to the Gaslamp Quarter. The center opened in 1989, financed with excess cash from the port, and expanded in 2001.

Project manager Charles Black, who was involved in developing Petco Park a decade ago, said the new, lower cost resulted from a 24.1 percent more efficient design by Denver-based Fentress Architects. Locating most of the expansion on the ground floor and adjacent to the existing exhibition space reduced the expansion from the original estimate of 1,266,719 square feet.

The new cost includes $300 million in construction costs, $150 million in design, insurance and other “soft” costs and $115 million in contingencies that take into account a potential 12 percent construction cost escalation and other unforeseen expenses. The bridge is no longer in the project budget.

“Everyone was somewhat aghast at that (earlier) number and thought it was too tall a mountain to have to climb,” Black said.

He said Fentress’ design figures were turned over to the Phoenix office of Rider Levett Bucknall, a global construction estimating firm, to price out. He added that the numbers are likely to change between now and the hiring next year of a general contractor, who will have to guarantee a maximum price.

The San Diego City Council will receive an update on the revised project and initial funding plan at its meeting next Tuesday.

Still looming large on the road to a projected 2015 opening date for the convention center expansion is Proposition 26, last November’s statewide ballot measure that imposed stiffer standards for enacting new taxes and fees. It’s still unclear whether the new law would ultimately require a citywide vote on the proposed hotel assessments, which would be levied through a special district encompassing all of the more than 40,000 hotel rooms in the city.

Under the scenario being pushed by the mayor’s office, hoteliers would vote on the proposed tax, with those hotels paying the most having a bigger say in the outcome.

And before any sort of convention center assessment district can be formed, a management plan will have to be crafted that will spell out the kind of convention business that will be pursued, including the size and type and what time of year they’re held, namely during off-peak times, said Cushman. The entire process could take up to six to nine months.

The proposal is similar to the city’s existing Tourism Marketing District, which derives its revenues through a 2 percent surcharge on hotel room rates for all lodging properties with 70 rooms or more. The current hotel room tax is 10.5 percent, which does not include the 2 percent surcharge.